A Leagile Inspired Supply Chain Model to Improve the Performance of Steel Industries
V. Kumar1[*], N. Mishra2, F. T. S. Chan3, M. Kumar4and G. MacKerron5
A Leagile Inspired Supply Chain Model to Improve the Performance of Steel Industries1Department of Management
DublinCityUniversityBusinessSchool
Dublin, Republic of Ireland
2School of Management and Business
AberystwythUniversity
Aberystwyth, UK
3Departmentof Industrial and Systems Engineering
The Hong KongPolytechnicUniversity
Hung Hom,Hong Kong
4, 5School of Management and Law Edinburgh Napier University, Edinburgh , UK
Abstract
The fast emerging customer market, the increased product variety and fluctuating demand have urged manufacturers to efficiently manage their supply chain activities to outperform their rivals. Steel industries being the backbone of manufacturing oriented economies are no exception to face these challenges. The severe competition from the less capital intensive mini-mills has enforced the integrated steel mills to change their old production strategies to become more efficient in handling their customers demand. Leagile an integration of lean and agile themes has emerged as an influential concept to tackle the uncertainties existing in the supply chain. This paper therefore explores the viability of the leagile supply chain management principles in steel industries. The paper also proposes a multi agent controller framework to facilitate the autonomous execution of the supply chain related decisions. The scheduling and planning agent of the multi agent framework proposes the use of particle swarm optimization (PSO) algorithm to solve the scheduling problem of charges in the steel industry. The paper emphasizes that the integration of leagile supply chain and use of an automated multi agent controller will enable steel industries to become more flexible and responsive to customer demands leading toreduce waste and increased profits.
1. Introduction
Supply chain management issues are of prime importance for the manufacturing firms in the current competitive global scenario. With the increasing worldwide population and changing buyer patterns, the demand of different products and services are escalating at very fast rate. The increased demand of the automobiles and construction materials has forced the integrated steel mills to make their supply chain more efficient to handle the varying uncertain demand. Moreover, the integrated steel mills are also facing severe competition from the less capital intensive mini-mills. The competitive strength of the integrated steel mills lies in their ability to produce a large variety of high-quality products. Therefore, the integrated steel mills have established themselves in markets, for more customized finished products, benefiting from the greater pricing power. However, reliable deliveries of such products are often required by the customers, this places emphasis on coordinated production schedules. Moreover, the increased product varieties and simultaneous increased pressure to reduce delivery lead time have caused integrated steel mills to look for alternative strategies that can enable them to handle things more swiftly. This has in a way enforced the integrated steel mills to change their traditional production strategiesto adapt alternative strategies that can efficiently handle uncertain customer demand.
Under these circumstances the strategy planners are compelled to devise a supply chain strategy that can lead to an efficient management of supply and demand.This has shifted the traditional thinking of researchers towards finding alternative ways that can withstand the increased complexity and at the same time increase the profitability by reducing the unnecessary processes. This thinking has directed their attention on lean and agile paradigms that have enabled firms to defend their competitors [1].Lean emphasizes on reduction of waste such as overproduction, waiting time, and over-processing whereas the agilestrategy aims at using the market knowledge and virtual cooperation to utilize the advantageous opportunities in a volatile market place. This thinking has gone a step further where these two widely popular paradigms have merged and resulted in a new paradigm known as ‘Leagile’ paradigm. The Leagile an integration of lean and agile paradigms is separated through a decoupling point. [2] proposed the term‘Leagility’ that combined agility and leanness in one supply chain through the strategic use of a decoupling point.Inspired by the abilities of the leagile supply chain in efficient handling of the demand and supply while simultaneously reducing the waste, increasing flexibility and maximizing profitability, this research proposes the adaptation of leagile supply chain principles in steel industries.
The structure of the paper is as follows. The next section elaborates the leagile supply chain in detail. Thereafter, the common scheduling problem faced by the integrated steel mills is discussed. The paperproposes a multi-agent controller framework to efficiently manage the various activities along the leagile supply chain and advocates the autonomous handling of the tasks with the help of different task oriented agents. The application of evolutionary algorithm in particular the particle swarm optimization (pso) method in determining the optimal schedule is also proposed. Finally, this paper reflects on the application of leagile supply chain principles together with multi-agent controller in improving the performance of integrated steel mills.
2. leagile: An integration of lean and agile principles
Running an efficient supply chain has always been a challenge for practitioners. In the present global scenario the ever changing demand pattern, supply shortages, changing taste of customers and tough competition from rival’sposse’s immense challengeson manufacturers for survival. Manufacturers often strive hard to compete with their competitors by addressing these challenges as much as efficiently and cost effectively. Therefore, managers often invest plenty of time planning and executing the right supply chain strategy. For manufacturers, primarily there are two elements that decide their supply chain strategy; customer satisfaction and market place understanding [3]. Thus, while planning their supply chain strategy manufacturers need to carefully consider how the planned strategy would satisfy the requirement of both the supply chain and end customers. A successful supply chain strategy needs to accomplish the task of maintaining the supply-demand balance, as well as at the same time reduce cost, increaseflexibility and maintain quality.
Two well known and established principles come into mind while aiming to have a successful supply chain strategy inheriting the attributes discussed earlier, first, the lean principle and second, the agile principle. The origin of the lean principle lies in the Toyota Production System (TPS) which dates back to late 1980s [4]. TPS focused on the reduction and elimination of waste which itself was motivated by the Kaizen principle of continuous improvement. Primarily lean is focused on reducing ‘waste’ or ‘muda’ which [4] identifies as overproduction, waiting time, time incurred in transportation, inventory, motion, defective units, and over-processing. Thus, the implementation of the lean principles in organization brings about improvements in terms of reduced cost, high inventory turns, reduced lead times, increased flexibility, and defect prevention. On the other hand, the agile principle focuses on flexibility and makes organization capable ofadapting to the changes in the market. Agile production system as an alternative to lean principleswas acknowledged by [5] since it can handle the increased product variety and overcome the problems faced in lean strategy.The successful functioning of agile manufacturing system in an organization requires enterprise level integration that includes design integration, process planning, and scheduling. Therefore, the increased range of product variety specialized, and fragmented customers, and markets have imposed the manufacturing industries to adopt the agile strategies.A number of researchers have published research papers discussing the application of lean and agile principles in different industrial scenarios between late 1980s to late 1990s ([2]; [4]; [5]; [6]; [7], and others).
Although, the lean and agile principles have proven to be successful in different contexts, the increasingcompetitive rivalry has urged manufacturers to come up with a more robust strategy that can encapsulate the prominent features of both the lean and agile principles. [2]proposed a new term ‘leagile’ that wasa combination of lean and agile principles separated by a decoupling point. Figure 1 shows the pictorial representation of the leagile supply chain strategy. Leagile supply chain advocates practicing lean manufacturing practices upstream until the decoupling point focusing mainly on the production activities and employ the agile manufacturing practices downstream the supply chain targeting to satisfy customer orders. Lean manufacturing values long term supplier partnerships whereas, agile manufacturing focuses on short term partnerships with suppliers after the point of product differentiation[8]. Therefore, in leagile strategy the appropriate positioning of decoupling point is critical for the success of the supply chain. Leagile supply chain advocates the positioning of the decoupling point as close as to the end user, so as to minimize the total lead time required to deliver products since lean principles are followed till this point. Leagile also promotes manufacturing of generalized products as far as possible towards the customer end and urges to assemble them to final products as per the market demandso that the chances of the product to be outdated becomes minimal.This provideses the leagile supply chain more flexibility in handling the unpredictable demand pattern. In real scenario, two decoupling points exist, the material decoupling point is the farthest point downstream to which products can be modularized and still remain adaptable to customer specifications whereas, the information decoupling point is the furthest point upstream to which information on real final demand can penetrate the supply chain[8]. Leagile focuses on adoption of the lean principles upstream in the supply chain till the decoupling point and after that the supply chain shifts to follow, the agile principles further downstream the supply chain. This unique feature of leagile principle makes it, a reliable strategy for the modern enterprises.
The benefits associated with the leagile supply chain have attracted attention of practitioners and has been successfully applied innumber of industries such as in clothing[9] and telecommunication industries[10]. Realizing the potential and benefits of the leagile supply chain, this paper proposes its implementation of leagile principles in steel industries (Figure 2). Integrated steel mills usually have their products in the form of flat rolled coils and bands. The leagile supply chain advocates that steel sheets, coils and bands are retained in the same form in the warehouse until the demand for the final product arrives. As soon as,customer demand arrives these generic forms are converted to the finished products by modifying the surface and structure in the assembly shop.After the assembly, the products are sent to the warehouses from where it is further delivered to desired destinations. The warehousing system follows the modern lean and agile concepts, rather than the conventional way to store and deliver the products. The demand and material information is regulated continuously to remain updated with the market scenario, and the production is directed accordingly. This makes the supply chain of steel industries, based on the pull system, rather than the conventional push system. Until the production of the steel sheets and coils phase, the lean principle is followed thus minimizing the waste and reducing the lead time. The delay in converting generic products to final products gives steel mills more flexibility to adjust to the fluctuating demand and reduces the over production of certain finished products. The flow of information in the leagile supply chain comprehends the uncertainties of the demand. Positioning of decoupling point closer to customer end also provides the steel mills with more accurate information on predictable demand pattern and avoid any delay in the process thus, making the supply chain more efficient.Therefore, the generalized production, shifting production to the customer end, improved warehousing, and regular flow of information can completely revolutionize the scenario of steel mills, leading to increased profit, greater flexibility, and make them more robust to the demand uncertainties.This shows that the application of leagile principles is viable in steel industries. The complex nature of the steel making in the steel industries causescertain scheduling problem. The next section elaborates the steel making process and the scheduling problem commonly faced by the steel industries.
3. Scheduling Problem in Steel Industries
The production of steel coils and bands starts from the conversion of the raw materials including iron ore, coke, and lime stone into molten steel and then to bands. Afterwards it is converted to the finished product ranges by modifying the surface and structure. The complex processes involved during the steel making needs proper scheduling of the charges on the various machines employed, due to the existence of the uncertainties such as deadlocks, breakdowns etc.The production process of steel starts with iron melting process inside the blast furnace which, later on is converted to liquid steel inside the melt shop. The three major steps involved during the production are steel making, refining and casting of molten steel into slabs, which is later on rolled into coils in the hot strip mill.
Steel making processes include complicated metallurgical processes, that requires expensive and energy intensive equipment. Since all the processes run in continuous mode and the machines run below their actual capacity, efficient scheduling of the steel making resources is of primery concern. Increased product variety has led manufacturers to compress their lead times.The whole scheduling problem of steel making consists of cast sequencing, scheduling of the individual charge sets, integration of individual charge sets scheduling to formulate rough scheduling, and optimal scheduling of the charges eliminating the machine inconsistencies. Out of these, the first three can be easily performed and depend on operational relationships whereas, the fourth step is decisive and requires to follow resource and machine constraints to ensure the practical feasibility of the resultant schedule.In steel mills the charges are processed in the order of converter, refiners and casters and often steel industries have limited number of each of those machines where charges could be scheduled[11]. Since charges can be scheduled only in the order of converter, refiner and casters, the scheduling of other charges can start only when one of the converters becomes free. Thus, it is very important to manage the scheduling of the charges in steel mills to reduce the queuing time, waiting time and overall lead time. To make the supply chain more responsive to the existing customer demand requires that product should be delivered to the customers with short lead times. In addition, the process of steel making should finish before the molten iron starts solidifying, as the solidification of iron will lead to the formation of the mushy state that would create problems during the casting process. Formation of mushy iron requires extra heat to convert it back to the molten form causing increase in the heating cost. Hence, to avoid the formation of mushy state the waiting time between the machines needs to be minimized simultaneously reducing the heating cost.Moreover, the steel mills also aim to reduce the queuing time as it affects the lead time to a great extent. The delay in the delivery of the charges to the required furnace or converters leads to the loss of the energy as well as production loss.The throughput in steel making process is defined as the total number of steel slabs produced of diverse cross-section satisfying all the constraints. Therefore, steel mills also aim to increase their throughput and that can be accomplished by proper scheduling of charges. In order to resolve the associated complexities in the scheduling of the charges in the steel mills as well as managing the leagile supply chain issues this paper proposes an autonomous multi-agent controller framework. The agent framework is discussed in detail in the next section.
4. Multi agent Controller Framework
Traditional supply chainmanagement followed in the integrated steel mills although is complex in nature; they can be still managed manually. The introduction of the leagile supply chain in steel industries reduces the lead time and increases the process flexibility however it increases the complexity of handling various tasks along the supply chain. Hence, managing the leagile supply chain manually becomes a difficult task. In addition, the success of the leagile supply chain depends upon the efficient management of the material and information flows. In order to achieve this goal a multi agent controller framework (Figure 3)has been proposed in this paper to facilitate the autonomous process execution within the integrated steel mills.The different agents involved such as ordering agent, supplier selection agent and central controlling agent and their tasks are elaborated in detailed below.